This section Covers..
01. Meaning
02. Mutual fund set-up
03. Product Focus
04. Schemes
05. Distribution Focus
06. Product & Services

[Provided by Ravichandran, Rasipuram, Erode, Tamilnadu (12.05.09)]

Introduction about Mutual Fund

Mutual fund is a mechanism for pooling the resources by issuing units to the investors and investing funds in securities in accordance with objectives as disclosed in offer document.

Investments in securities are spread across a wide cross-section of industries and sectors and thus the risk is reduced. Diversification reduces the risk because all stocks may not move in the same direction in the same proportion at the same time. Mutual fund issues units to the investors in accordance with quantum of money invested by them. Investors of mutual funds are known as unit holders.

The profits or losses are shared by the investors in proportion to their investments. The mutual funds normally come out with a number of schemes with different investment objectives which are launched from time to time. A mutual fund is required to be registered with Securities and Exchange Board of India (SEBI) which regulates securities markets before it can collect funds from the public.

Mutual fund set up

A mutual fund is set up in the form of a trust, which has sponsor, trustees, Asset Management Company (AMC) and custodian. The trust is established by a sponsor or more than one sponsor who is like promoter of a company. The trustees of the mutual fund hold its property for the benefit of the unit holders. Asset Management Company (AMC) approved by SEBI manages the funds by making investments in various types of securities. Custodian, who is registered with SEBI, holds the securities of various schemes of the fund in its custody. The trustees are vested with the general power of superintendence and direction over AMC. They monitor the performance and compliance of SEBI Regulations by the mutual fund.

SEBI Regulations require that at least two thirds of the directors of trustee company or board of

trustees must be independent i.e. they should not be associated with the sponsors. Also, 50% of the directors of AMC must be independent. All mutual funds are required to be registered with SEBI before they launch any scheme. However, Unit Trust of India (UTI) is not registered with SEBI (as on January 15, 2002).

Marketing of mutual funds in India

The changing marketing trends in the mutual fund industry in India can be easily linked and traced to its history of growth. The changes in marketing strategies of Mutual Fund can be characterized by 4 stages which have evolved along with the growth and evolution of the industry.

Product Focus

For the first three decades of the industry, from the setting up of UTI till the entry of private sector players, the only focus of the marketing strategy was different product offerings. UTI and various other public sector mutual funds focused on introducing an array of products falling in different categories. The categorization was primarily based on two factors: one was the way the schemes were traded and the other through different composition of debt and equity securities in the scheme.

 

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